Real estate is one of the most important asset classes. Investment may however be hampered by the large investment volume and the expense entailed in the construction, buying, selling and maintenance of property. However, various ways exist for retail investors to invest indirectly in residential or commercial real estate. Not all products offer the security that many associate with property ownership, land registry entries and reliable sources of rental income. Investors should examine real estate-related investments just as critically as other kinds of investments. The new edition of the Austrian Financial Market Authority (FMA) consumer information series “Let’s talk about money” (Reden wir über Geld) provides an insight.
The FMA’s consumer information publication is entitled “The label says real estate, but do you really get real estate?” For example, real estate funds buy and sell properties and holders of units of funds hold a share in them. In addition to the development of the value of the real estate owned by the fund, there is the risk for investors that a fund may restrict the redemption of units in the fund under certain circumstances and must therefore wait longer to receive their invested money back.
In contrast to funds that directly purchase real estate, real estate ETFs invest in real estate companies, such as real estate investment trusts (REITs). They can be bought and sold at any time, however the price fluctuates, and can fall steeply in times of crises. In the case of real estate crowdfunding, construction projects are jointly financed by a large number of retail investors, generally by qualified subordinated loans that often have higher levels of interest, but which have a high risk of default. In the case of real estate bonds – recently in tokenised form via the blockchain – investors lend a real estate company in return for interest payments. The risk of default also exists here.
In the case of real estate funds and ETFs the key information document that funds providers are required to draw up contains detailed information for investors about the risks and costs entailed. Capital market prospectuses disclosing the relevant risks must be published for bonds and closed-ended real estate funds, from a certain volume. As ever, the following applies: Investors should always define their financial goals prior to taking any investment decision. It is particularly important to remember that there is a fragile relationship between the risk, return and liquidity of an investment that cannot be maximised for all factors at once.
The current edition of “Let’s talk about money” can be found in English, along with all past editions on the website https://redenwiruebergeld.fma.gv.at/en. Follow “Reden wir über Geld” on Instagram too at @redenwiruebergeld. @redenwiruebergeld
Journalists may address further enquiries to:
Boris Gröndahl (FMA Media Spokesperson)
Telephone: +43/(1)249/59-6010
Mobile: +43 676 8824 9995
E-Mail: [email protected]